World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Friday, August 19, 2011

Amid the financial gloom of the past three years, one part of the University of Washington has rebounded: Growth of the UW’s endowment fund has outpaced those of Harvard, Yale and other giant schools.

The value of the university’s consolidated endowment fund rose to $2.14 billion on June 30 at the end of the third quarter of 2011’s fiscal year, the latest number available, up 10 percent from a year earlier. That follows an 11 percent rise in 2010.

Like many investment pools, the UW endowment has bounced back since it lost 23 percent of its value during the financial crisis…

That’s nice, isn’t it? Alumni are very generous and contribute greatly to the University’s Endowment. And the Wall Street people who run this giant fund are doing a great financial engineering job creating “growth.”

Of course with a fund that size, there is A LOT of fees to be earned.

But what is the endowment fund for anyway? Is its goal to provide churn and fees to the people who manage the fund? Or is the purpose of the fund to educate this state’s youth?

I would contend that education is taking a back seat to Wall Street… again. Let’s follow the flow of money, shall we?

The University raised tuition 28% in the past two years, all approved by the Washington State Senate who regulates the tuitions of the six Washington state colleges. They get to regulate the tuition because the state uses taxpayer money to help fund the school.

Over the past two years, the colleges, led by the U.W., lobbied the state for the right to set their own tuitions. The state, without the approval of the voters, gave them that right:

Immediately upon approval, the University of Washington raised tuitions AGAIN, this time by a record amount, 20% more on top of the previous raises. In addition, they are laying off a “significant” portion of their staff due to taking $106 million in cuts from the state.

The cut in state funding is due to the impossible math the state faces. It’s impossible because everything the state does they first borrow money from Wall Street and pay them fees and interest to finance it! Of course any push for a state chartered bank that would eliminate finance costs doesn’t make any headway because it’s fought by the private banks who produce money from nothing.

So, the state is actually bankrupt. The state gives the colleges the right to massively raise tuition, but in turn cuts the amount of funding to the schools – not eliminate mind you, but cut. The schools cut staff, hike tuition which comes out of the pockets of Washington families… AND further burdens the students with massive student loans, the only category of consumer credit that is still growing.

WHO issues those loans? Why private banks, of course! Who profits from those loans? Private banks, of course! Who lobbied to make student loans the only loans that are not dischargeable in any fashion whatsoever inside of any bankruptcy process? Private banks, of course!

So the state is bankrupt, Washington families are poorer, and the students are debt slaves. All are the servants of the private banks.

Meanwhile the University’s endowment fund balloons to well over $2 billion!!! And the boys on Wall Street churn and fee, churn and fee.

Congratulations! I’m so proud!

Of course I'm not really proud, it's just that this disgrace produces a sarcastic tone. What I'm really wondering is what would happen if the University used its endowment for its intended purposes instead of sticking it to the students and families? You can do one heck of a lot of educating with $2 billion! Do the math. This is the typical create an emergency on one hand while robbing you with the other. It’s a disgrace and an embarrassment from my point of view.

The state is doing this same trick in other areas. The State parks is one, where the state just unilaterally imposed a new $30 annual parks fee in order for anyone to enter our beautiful state parks. Let’s examine that flow of money…

State parks were already bought and paid for by the taxpayers. Their upkeep has been paid for from sales and property taxes. The impossible math created by the private banks again causes the state to be functionally bankrupt. Instead of taking it out on the bankers, the state turns to its citizens claiming they need the money or else they will shut down the parks and deny the citizens access to their own land!

No vote, they impose the fee. The money travels to the general fund where it services the debt held by the private banks. Now think about the poor who are getting poorer. Many can’t afford food for their children, and the public parks were one of their only refuges. No longer – now you can’t even enjoy nature without an additional fee on top of the taxes we already pay.

These schemes do nothing but place further pressure on the people. This pressure will continue to build under the weight of the impossible math until “other events” force a proper change in the rule of law.

The state should be embarrassed, the Governor should be embarrassed, the university should be embarrassed, but I know that the banks are not. They are narcissists – the more they take, the better they feel.

Equity futures are down once again this morning despite a rapidly falling dollar. Bonds are higher again, now into record territory on a closing basis. Oil is flat, but gold is running wild, already hitting more than $1,882 an ounce! Silver is also up substantially, and food commodities are back into the range they have been the last couple of weeks.

That rise in gold is definitely on another level. It has now risen 55% in the past year, the one year chart is below:

Note the parabola on the 10 year monthly gold chart… they start out subtly, beginning here from a $250 base and growing at a moderate rate until 2005 when the growth rate began to build. Then, in late 2008, early 2009, when quantitative easing was announced, gold began rising on a much steeper path:

Sure Bernanke, you can create inflation… and you can wreak havoc on the world too, which is exactly what you have done.

The bond market is now in record territory, with rates even lower than at the height of the 2008 crisis. That level of debt is not sustainable, the math that took it there is quite impossible – it is therefore a bubble of giant proportions and that will burst just as surely as the sun will rise again tomorrow. It is the toppling of the bond bubble that will mark the end of the current power structure, for it is the bond market that gives them power – it is the base of their Ponzi.

Once macroeconomic debt saturation has set in, forcing more debt backed money into the system only works to burden the economy further with impossible math – it becomes a drag that real production must support. The more drag, the less real production there is, and the FEWER jobs there will be!

“Stimulating” the economy with debt backed money works until the debt saturation point, but after that point it is exactly the opposite – that’s where we are, the backside of the debt curve.

Propping up the stock and bond markets at this point destroys the real economy, and it destroys jobs. Realize that it doesn’t have to be like this at all! There is zero need for any national debt whatsoever – it is a construct of private individuals, and it flies in the face of what’s natural and what’s sustainable. It is a system based upon individual greed – great if you’re one of the benefactors, sucks if you’re not. The power to produce money rightly belongs to everyone equally, therefore it is our government’s responsibility. In fact it’s the most important thing our government should be in control of, and it’s the one thing they are not!

There are no economic reports today, however the Philly “Fed” Survey yesterday was a shocker, falling from the prior index value of 3.0 all the way to -30.7. The consensus of the clowns was +4.0. This report was for the month of August as the survey was accomplished this month and is our first look at August manufacturing data. This is a cliff dive compared to data from July, the Industrial Production number released just this Tuesday was positive, but it was based on July data. Here’s Econorattled:

Highlights
An eye popping minus 30.7 headlines a troubling manufacturing report from the Philly Fed. The reading indicates very significant month-to-month contraction in general business conditions for August, one consistent with a shock and one compared against a small gain of 3.2 in July. But the report cites no particular factors behind the contraction, contraction that's evident throughout the details of the report.

New orders fell to minus 26.8 from plus 0.1, shipments minus 13.9 from plus 4.3, number of employees minus 5.2 vs plus 8.9, unfilled orders minus 20.9 vs an already dismal minus 16.3. Price data show a contraction for output prices and a much slower rate of inflation for input prices. Delivery times improved significantly which is another sign of weakness.

The six-month outlook also crumbled, coming in above zero but just barely at 1.4 vs July's 23.7. The Empire State report, released Monday and covering the New York manufacturing economy, also showed contraction but at a much less severe rate. Next week and the week following eyes will be on a run of other regional indicators to see if the outlook for the national manufacturing economy has suddenly taken a turn for the worse.

Zerohedge ran a chart yesterday comparing Nonfarm Payrolls to the Philly Fed Survey. The correlation is obvious, as is what we can expect for near term employment prospects:

Meanwhile the evening news carries footage of President Obama vacationing in Martha’s Vineyard, while juxtaposing images of the unemployed masses lined up in Philadelphia for a job fair – the line circled entire city blocks. Sad. Those people stand no chance with the current criminal class running the show, and they know it. The youth know their future. They see two separate and distinct rules of law – one where the upper criminal class gets away Scott-free robbing trillions, while the lower classes suffer the fate of no meaningful employment and an oppressive rule of law foisted unfairly upon them from the criminals in suits.

Yes, they are going to lash out, this is all a part of the one and only rule of law that matters, that is the natural rule of law which is self-righting and is a part of the evolution of our species – it is a part of the condition of humanity. That natural condition demands equal economic opportunity for everyone. When it gets too far out of balance, then the pressure builds until “other events” release the pressure and restore the balance.

Humanity is slowly working towards the tenants of Freedom’s Vision. That is that the power of money creation belongs to the PEOPLE equally. Any rule of law that gives that power to a few individuals is an UNNATURAL RULE OF LAW. When unnatural rules of law are present in society then pressures of inequality build until, again, those “other events” occur to rewrite the rule of law.

A major rewrite is coming, those “other events” are in full swing. I won’t be surprised if the rewrite begins on the streets of Philadelphia…

Thursday, August 18, 2011

No doubt about it, confidence is lost. Not only are equities down hard this morning, but gold is above $1,820 an ounce and trucking. The dollar is up with the deleveraging, bonds are sharply higher, oil is down, silver is up and food commodities are lower. This is the lack of confidence trade, however money is still flowing into bonds, when money is flowing out of bonds with the above other conditions then you know you really have a problem. Of course the markets aren’t real as we don’t know where the “Fed” and HFT manipulators are pushing things. Keep your eye on gold, it is parabolic.

The oil chart is saying that another wave down has started, but so are the equity charts where we have now broken down from the rising wedge:

The rising wedge in the futures is also breaking, it was wider due to activity that occurred outside of normal trading hours:

Weekly Jobless Claims jumped once again, this time rising to 408,000 for the prior week. Of course the prior data was revised higher as well, same old game:

Highlights
Initial claims rose in the August 13 week but today's report still points solidly to month-to-month improvement for the August employment report. Initial claims came in at 408,000 for a 9,000 rise from 399,000 in the prior week which was upwardly revised by 4,000. But the four-week average fell for the seventh straight week, down 3,500 to a 402,500 level that is nearly 20,000 lower than the month ago comparison.

Continuing claims were little changed, up 7,000 to 3.702 million with the four-week average down 5,000 to 3.716 million. The unemployment rate for insured workers is unchanged at 2.9 percent.

There are no special factors distorting the data which again point to improvement in the labor market.

The CPI, which vastly understates inflation, rose .5% in July, much more than expected, but largely due to rising food costs and the short term bounce that occurred in oil. Still, it’s claiming 3.6% consumer inflation for the year which again is about 9% lower than tracked by Shadow Stats. This single distortion ripples through all others and is the most important false data that is at the root of the bad math, and at the root of the disconnect between reports and reality. That disconnect is a very large part of the reason people are losing confidence. Here’s Econoinane:

Highlights
Consumer price inflation surged in July on stronger gasoline and food costs. The consumer price index in July jumped 0.5 percent. The June number topped the median estimate for a 0.2 percent increase. Excluding food and energy, the CPI increased 0.2 percent after a 0.3 percent jump the prior month.

Turning to major components, energy rebounded 2.8 percent after dropping 4.4 percent the month before. Gasoline jumped 4.7 percent, following a 6.8 percent plunge in June. Food price inflation accelerated, jumping 0.4 percent, following a 0.2 percent rise in June. Within the core the shelter index accelerated in July (largely lodging, up 0.9 percent), and the apparel index again increased sharply ( up 1.2 percent). In contrast, the index for new vehicles was unchanged after a long string of increases.

Year-on-year, overall CPI inflation worsened to 3.6 percent from 3.4 percent (seasonally adjusted) in June. The core rate rose to 1.8 percent from 1.6 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in July while the core was up 1.8 percent.

Despite a sluggish economy, inflation is back but most of the acceleration is supply related, notably for food. And energy rebounded only partially from the prior month. The lodging subcomponent, however, probably is seeing some improved demand which is actually a good thing. Inflation is up but not much is related to a surge in demand.

Not much related to a surge in demand? LOL, are these clowns for real? People are getting angry, deservedly so, over this type of inane “analysis.”

A lot of data comes out at 10 Eastern this morning, including Existing Home Sales, the Philly “Fed” Survey, and supposed “Leading” Indicators. We’ll report those inside of today’s Daily Thread.

Boycott the election? You bet. Withdrawing all participation in the central banker backed schemes is really the only appropriate action from my point of view. I don’t support or participate in their phony markets, I don’t support or participate in their phony banks, so why should I support or participate in their phony elections?

No more for me. Not until the money power has been restored to the people. I refuse to be manipulated with their inane and insane distract you drivel. The latest drivel of which dripping from Michele Bachman’s mouth, “I’ll bring back $2 gas!”

Major league eye roll there.

As they say, fool me once… well I think I’ve been fooled many, many times when it comes to elections, that was before I really understood that the politicians are nothing but central banker spokespeople. I saw Obama talk, and man did I not like Bush. That was the setup, you WANTED to believe and to have HOPE! He flat out said he was going to end the wars and bring the troops home! Of course he couldn’t add 2 + 2, but at least he was on point regarding the insane wars… but then once again actions completely disconnect from words, all confidence is now lost and I can’t say who the worst president is, but I actually now know the reality is that the United States doesn’t really have a President at all, what we have is a central banker spokesman. Doesn’t matter the flavor, they cannot get elected in what’s becoming billion dollar campaigns without central banker support.

Whatever your pet issue in politics is, be it war, abortion, gay rights, whatever… you need to understand that they are all secondary to the most important issue which is WHO controls the production of money. For it is they WHO control all those other issues! If YOU want to have a legitimate voice in a real government, YOU must control the production of money!

By YOU, of course, I mean that your representative in government is supposed to represent you, not a central banker, not a corporation.

Change is coming quickly now. “Other events” are in full motion and you are going to see them accelerate. Keep your eye on the ball and do not be distracted with their games. Withdraw your support from their games and get into something real.

Wednesday, August 17, 2011

Equity futures are higher this morning but still tracking inside of that rising wedge. Of course we are sacrificing the dollar to do it, bonds are flat, oil is higher, gold is flat, silver is higher, and food commodities are breaking higher out of the range they have been in.

On the front page of cnn.com is a poll asking, “Have you lost confidence in the ability of world leaders to tackle economic problems?” Currently the response is that 86% have already lost confidence! That’s really all you need to know, with numbers like that, it is game over for those in power… eventually. In the mean time we have to suffer through “other events” while we watch the central criminal’s control slip away.

Gold at $1,800 an ounce? Yeah, there’s your confirmation right there that confidence is gone. It’s not just in the process of leaving, it’s already gone, the victim of impossible math. Merkel-Sarkozy deal? Who cares? These clowns come up with scheme after scheme – they are all the same… Make money from nothing to indebt already over-indebted countries (countries that are made up of real people with stagnant and falling incomes). Its impossible math, it simply doesn’t work, can’t work, and thus the loss of confidence is finally here. Those who can ‘do’ math knew this was coming a long time ago, while those who can’t generally are elected to public office. Those who know, but lie or shill, work in central banks.

Markets? Again, they are not real, they are a highly manipulated illusion. Wait. The loss of confidence will eventually shake out the criminals and a new monetary system will be installed. Depending upon events of that shakeout and how the next system evolves will determine whether or not the markets become real again. The criminals must be prosecuted, the rule of law must be restored, the debt saturated condition of the PEOPLE must be cured, and nations need to learn how to operate a money system that does not give private bankers the right to charge the nation interest for its own money, nor give unlimited money making privileges to a few private individuals. Furthermore, the ability of special interests to capture government must be reversed – that is a part of restoring the natural rule of law, the government works for the people, not for the interest of corporations (that are NOT people).

Speaking of special interest create money from nothing criminals, the Mortgage Banker’s Associate claims that Purchase Applications fell another 9.1% in the past week, but that refinance activity increased 8.0%. Sure, whatever… anyone gullible enough to believe that nationwide activity swings 30% or nearly 10% every week, deserves to have their money stolen from them. Here’s Econogullishill:

Highlights
The ongoing drop in interest rates is driving refinancing demand higher but, unfortunately, has yet to drive up demand for home purchases. The refinancing index extended its run of jumps in the August 12 week with an 8.0 percent gain. But the purchase index continues to show weakness, down a very steep 9.1 percent. The report, which is produced by the Mortgage Bankers Association (MBA), cites stock market volatility and weak economic data as possible reasons for the drop in purchase activity.

The rate for 30-year mortgages fell five basis points in the week to 4.32 percent with the 15-year rate also down five basis points, to 3.47 percent for a new survey low. Next housing data will be tomorrow with existing home sales for July, which based on prior gains in the pending home sales report and not any strength in MBA's purchase index, are expected to show improvement.

Interest rates have been at historic lows for years now. Really, a few basis points move spurs huge swings in refinancing activity? BullS___! Anyone who still wonders how confidence can be lost need only study the operations of the MBA.

Speaking of fraudulent reports, the PPI came in at .2% month over month, but at 7.2% year over year. Here’s Econocon:

Highlights
Producer price inflation surprised on the high side despite a softening in energy costs. The culprits included food, motor vehicles, and tobacco. Producer prices in July rebounded 0.2 percent, following a 0.4 percent drop the month before. The July pace came in higher than the market median estimate for no change. By major components, energy dipped 0.6 percent after a 2.8 percent fall in June. Gasoline declined 2.8 percent after dropping 4.7 percent the month before. In contrast, food costs jumped another 0.6 percent, following a rebound of 0.6 the previous month.

At the core level, PPI inflation accelerated to a 0.4 percent rise after jumping 0.3 percent in June. Analysts had forecast a rise of 0.2 percent. Strong gains were seen in tobacco products, light trucks, and pharmaceutical preparations. Nearly one-quarter of the July advance can be attributed to a 2.8 percent increase in prices for tobacco products. Light truck prices jumped 1.0 percent in the latest period while pharmaceutical preparations surged 3.2 percent. Passenger car prices rose but a more moderate 0.2 percent. Still, shortages of motor vehicle models dependent on parts from Japan continued to put upward pressure on prices.

For the overall PPI, the year-ago pace in July posted at 7.2 percent, compared to 7.0 percent in June (seasonally adjusted). The core rate in July rose to 2.5 percent from 2.3 percent the month before (seasonally adjusted). On a not seasonally adjusted basis for July, the year-ago headline PPI was up 7.2 percent while the core was up 2.5 percent.

Overall, inflation has picked up due largely to food costs and despite softer energy costs. The core rate is up significantly but likely due to temporary factors.

Inflation statistics vastly underreport inflation. According to Shadow Stats the CPI is understated by about 9% (!), and that would apply to Producer Prices as well, which tend to lead Consumer Prices:

Stocks are creating a rising wedge pattern that is getting close to terminating. Below is a 30 minute chart of the SPX, you can see that wedge clearly and this morning we are off the upper boundary:

In Europe, news of weaker than expected GDP “growth” has disappointed the markets once again, and thus it is blamed for weakness this morning – the media always has to pin some label as to why…

Meanwhile the housing market in the U.S. continues to wallow in depression. Housing starts for July fell from June’s 629,000 to 604,000, with permits also falling and both disappointing. Here’s Econoclown:

Highlights
New housing construction in July headed back down to trend sluggishness after an unexpected boost in June. Housing starts dipped 1.5 percent in July, following a 10.8 percent jump in June (originally up 14.6 percent). The July annualized pace of 0.604 million units beat expectations for 0.600 million units and is up 9.8 percent on a year-ago basis. The decline in July was led by a 4.9 percent drop in the single-family component, following a 7.5 percent surge in June. The multifamily component continued upward, gaining 7.8 percent after jumping 21.2 percent the prior month.

By region, the drop in starts was led by a monthly 37.7 percent decrease in the Midwest with the West declining 3.0 percent. The Northeast gained 34.7 percent while the South rose 5.6 percent.

Homebuilders remain cautious as housing permits slipped 3.2 percent, following a 1.3 percent rise in June. The July pace of 0.597 million units annualized came in below the median forecast for 0.606 million. Permits in July are up 3.8 percent on a year-ago basis.

The bottom line is that housing is still extremely anemic with perhaps mild strength in the multifamily component. Until labor markets improve significantly, this sector is likely to remain in the doldrums.

On the news, equity futures edged up but remained significantly negative due to disappointing news on second quarter growth in Europe.

The wave of deflation is already hitting Import and Export price data, with Export prices falling and Import prices rising. That would seem to me to be the worst of all worlds, and is a product of failed and corrupt central banking policy. Again, let’s bring in the clowns:

Highlights
A monthly upswing in prices of petroleum products drove import prices up 0.3 percent in July vs June's revised 0.6 percent decline in a month when petroleum prices fell. Prices for imported petroleum products rose 0.6 percent in July and fed through to a 0.2 percent rise in industrial supplies excluding petroleum. The latter is a closely watched component which in June fell 0.4 percent. Prices for imported finished goods are mixed showing no change for capital goods though consumer goods do show a less-than-moderate gain of 0.4 percent.

Prices for US exports, down 0.4 percent in the month, were pulled down by a big fall in agricultural prices which fell 4.3 percent in July. Excluding agricultural prices, export prices rose an incremental 0.2 percent.

A look at year-on-year rates, which are the highest since 2008, shows the longer term effects of this year's high prices for both petroleum and agricultural products. Import prices, reflecting petroleum, are up a year-on-year 14.0 percent with export prices, reflecting agricultural products, up 9.8 percent. But the monthly readings in general are tame and should not upset expectations for tame readings in tomorrow's producer price report and Thursday's consumer price report.

Industrial Production was just released and contrasts with the Empire State report that was negative. Industrial Production, according to this report, supposedly rose .9% in July. This is, however, another “Fed” report – one that was also modified a few years ago so that the data more closely fit into their fake inflation under reporting models. Thus this report also suffers from a false upside bias, the same as our current GDP where financial engineering is equated to real production. Fluff and fraud in the engineered data, anything real is negative. Here are the clowns shoveling the fraudster’s manure:

Highlights
Manufacturing appears to be on the mend as production improved sharply in July and June was not as soft as earlier believed. Overall industrial production in July posted a 0.9 percent gain, follow a 0.4 percent rise the prior month (originally up 0.2 percent). The latest figure topped analysts' forecast for a 0.5 percent boost.

By major industry, manufacturing showed significant improvement, advancing 0.6 percent, following rise of 0.2 percent in June (originally no change). The auto component finally made a comeback, jumping a monthly 5.2 percent after three consecutive declines including June's 0.9 percent decrease. And production was moderately healthy outside of autos. Excluding motor vehicles, manufacturing rose 0.3 percent, following a 0.2 percent rise in June.

Overall capacity utilization in July improved to 77.5 percent from 76.9 percent the prior month. The June number came in higher than the median estimate for 77.0 percent.

Today's industrial production report is probably the strongest argument so far that second half growth is improving from a sluggish first half.

On the news, equity futures rose but remained negative on disappointing news on second quarter growth in Europe.

Pleeeaaassse! What nonsense. And even with their over reporting, these numbers are nothing but depression readings. Think about how long the economy has been shedding manufacturing and yet we STILL only have mid to upper 70s capacity utilization! Sick.

The impossible math of debt saturation will force the fraudsters to adjust their data some more before it’s over. And the clowns, fully dependent on the manure for their living, will no doubt continue to shovel it. But the impossible math just is, and therefore will not be denied – it is terminal.

Yesterday Starbuck’s CEO, Howard Schultz, called publically on all corporations to end their political contributions until the politicians reach a sound and workable agreement on the national debt. This is quite the statement from one of our large corporations, ground breaking that he would do that and unthinkable just a short time ago.

His call out is the result of seeing the impossible math manifest itself – thus it is another “other event” on the road to a total loss of confidence. What Shultz may or may not understand, is just how terminal the math situation is. There is no fix short of removing the bankers, clearing out the debt saturated condition, and taking back control of the production of our money.

Monday, August 15, 2011

Equity futures are slightly positive this morning on the back of a rapidly descending dollar. Bonds are higher, oil, gold, and silver are flat, while food commodities are slightly higher.

The futures appear to be making a rising wedge or bearish flag. If they stay within the confines of that flag over the next couple of days, then I will expect it to break downwards… but if it breaks upwards, it could still be creating a rising wedge and the upper boundary will have to be watched. Regardless, HFT fun and games are a given:

Speaking of HFT fun and games, the last week was the most volatile week in history point-wise, with 4 days of 400+ point swings on the DOW. What’s that telling you? That the markets are exactly what I’ve been saying all along – not real, highly manipulated, and mostly fluff. Why would any rational person “invest” in such a market? Beyond me, my advice is to get real, stay real, and tell the supposed experts who contributed to this nightmare where to go.

Think about it… The “Fed” creates massive quantities of money from nothing, we are spewing debt out all orifices, we raise the debt ceiling, the U.S. debt is downgraded… that results in what should be higher interest rates. But the “Fed” is creating money from nothing to buy bonds to keep interest rates artificially low. Can’t allow rates to rise because interest expense becomes tremendous – so they print more to buy more bonds. And the spiral continues.

Whenever that spiral is interrupted waves of deflation result. But because the “Fed” is in control and is not allowing the debt to clear, each wave of deflation is met with more printing, and thus the primary trend is inflation. Inflation is the death of all currencies throughout history, all of them – ours will be no exception that is painfully obvious.

Daily Thread commentator hsir135 posted a couple of good charts over the weekend that are a good reminder of the primary trend. The first is our current account deficit – of course it’s just a fraction of the total real deficit, but let’s live for a moment in the “Fed’s” fantastic lie:

The next chart shows the U.S. Current Account Deficit with the debt limit increases and also the price of gold. Amazing correlation there with gold, those who got real a long time ago have protected themselves, while those who bought into the paper fluff are left on a nauseating roller-coaster ride of fraud and deceit:

Remember, my opinion is that gold is acting to maintain its worth – that doesn’t mean it should be what backs our money. What’s far more important than WHAT backs our money is WHO is in control of creating it.

Speaking of waves of deflation, the Empire State Manufacturing Index took another header in August, falling from -3.76 to -7.72 when +1.0 was expected by the clowns. Here’s Econohope:

Highlights
The first indications on the August manufacturing sector are strongly negative. The Empire State index fell nearly four points into more deeply negative territory, at minus 7.72 to indicate monthly contraction in general business conditions. Details show a third straight monthly contraction in new orders, down more than two points to minus 7.82. Unfilled orders are contracting very deeply, to minus 15.22 vs July's minus 12.22. With new orders on the slide and backlog having been worked down, the outlook for the region's shipments and employment is negative.

The six-month outlook is in fact the most negative aspect of the August report. The six-month outlook for new orders, at plus 6.52, and for shipments, at plus 7.61, are the lowest since 9/11. The overall outlook reading at 8.70 is down nearly 25 points in the month for the lowest reading since early 2009.

Hopefully the six-month readings will be only be temporary, tied specifically to the debt-ceiling drama and what is hopefully now faded market volatility. Industrial production data tomorrow will offer hard data on the manufacturing sector during July while the Philly Fed's report on Thursday will offer more anecdotal data on this month's conditions.

Uh, huh, “hopefully…”

The TIC fraudulent data for June (remember that far back, nice timely “data”), came in barely positive at +3.7 billion, but the Net overall data was negative for the second month in a row, coming in at -29.5 billion. This report is HIGHLY questionable in my opinion as we cannot audit the “Fed” and they do not account publically for all their swap lines and other backdoor dealings. In fact, I would go so far as to call this report, and almost anything that comes from the “Fed” or Treasury, suspect to be polite - all their reports should be filed under works of "Fiction." Here’s Econodope:

Highlights
Selling of US securities by private foreign accounts drove net inflow of long-term securities to a very weak plus $3.7 billion in June vs an already weak and revised plus $24.2 billion in May. Private foreign accounts sold a net $23.0 billion of US long-term securities in the month for the lowest reading on record. Official foreign accounts were an offset at plus $11.5 billion though down from the prior month's $23.2 billion. Foreign demand for US Treasuries, agencies, and corporate bonds was weak across the board though demand for equities was down but still respectable. In a positive, demand for foreign securities by US residents ended a run of outflows with a net $15.2 billion inflow. Low US yields had been pushing domestic investment overseas and limiting investment at home.

But foreign participation in US financial assets is essential for the nation to funds its government and trade debts. And given the effects of the debt-ceiling crisis on investor confidence, the outlook for the July and August TIC reports is not positive. Other details for June show a second straight outflow for total securities which include short-term securities, at minus $29.5 billion vs May's minus $48.8 billion. One positive in today's report is a slight uptick in Chinese holdings of Treasuries, at $1.17 trillion with Japanese holdings only fractionally lower at $911.0 billion.